As the effort to revive passenger train service from the Sault to Hearst continues, Canadian National Railway (CN) is attempting to recover money it says is owed from the previous operator.
In a lawsuit currently before the Ontario Superior Court of Justice, CN says it was misled into believing Railmark Holdings, Inc. had the financial wherewithal to pay for services relating to the failed sale of the Algoma Central Railway passenger service and Agawa Canyon Tour Train and is seeking almost $600,000 from the Wixom, Mich. company and its owner.
Of that amount, joint plaintiffs CN and Algoma Central Railway (ACR) claim $128,663.20 represents money Railmark is alleged to have accepted from tour train booking despite never having owned or operated that service.
Joint plaintiffs CN and ACR are claiming breach of contract, breach of fiduciary duty and breach of trust against defendants Railmark Holdings, Inc., Railmark Canada LTD. and owner B. Allen Brown.
A motion was presented to the court on Thursday by CN's counsel. The matter has been adjourned to March.
In a statement of defence filed in October of 2015, the defendants deny breaching any agreement or trust and asked the action be dismissed.
Railmark assumed operation of the ACR passenger service on May 2, 2015, taking possession of the passenger depot on Bay Street, despite no finalized sale of either the ACR passenger or tour train services, CN says in its claim.
As an interim measure, CN says it provided crews, equipment leases, fuel and other services that it believed were to be reimbursed by Railmark.
CN says it has not received any money from Railmark in regards to the services provided between May 2 and July 14 of 2015 and is seeking $469,173 in return.
In the statement of claim, CN and ACR say Railmark received money from Agawa Canyon Tour Train ticket sales, though no purchase of the asset was finalized.
In an affidavit, Terry O’Brien, director of passenger operations for CN, said Railmark had no right to keep the money from ticket sales for a service it never operated.
“Both myself and others at CN made repeated demands of Allen Brown to pay this money,” writes O’Brien.
Despite those requests, said O’Brien, the money has never been reimbursed.
Included in court documents is a July 1, 2015 email to Brown from a high-ranking CN official threatening action if the money was not paid by the following day.
“Allen,” writes Fady Mansour, CN’s director of corporate development, “I have a bad feeling. I just do.”
“This is our money. You have no right to it and should (not) be using it,” he added.
None of the claims made by either the plaintiffs or defendants has been proven in court.
In the statement of claim, the plaintiffs said they were on the hook, having to honour the Agawa Canyon Tour Train reservations allegedly made by Railmark, even though they had received no payment for them.
In the October 2015 statement of defence, Railmark Canada said at no time has it withdrawn funds from the collective operation of the rail service.
CN and ACR terminated their contractual relationship with Railmark on July 14, 2015, citing non-payment, and the Sault-to-Hearst passenger service has not operated since.
The Agawa Canyon Tour Train continues to be operated by CN during its June-to-October tourist season.
In the October statement of defence, the defendants claim their efforts to revive financing were stifled by a last-minute revision by the Sault Ste. Marie Economic Development Corporation to the proposed agreement with the city made on June 2, 2015 which required Railmark to provide evidence it had access to a $550,000 line of credit.
“This was not a term of the original request for proposal, which only required that Railmark demonstrated it had the necessary working capital to finance the acquisition and operation of the rail service,” reads the statement of defence.
Transport Canada granted a $5.2-million, three-year extension of a subsidy to operate the passenger service, but asked that the city of Sault Ste. Marie dole out the funds instead of offering them directly to Railmark.
The defendants claim a five-year funding commitment from Transport Canada was a condition of the ACR sale agreement.
SooToday contacted Brown and CN, and both declined to comment for this story.
A public information session will be held Nov. 16 at the Canadian Bushplane Heritage Centre focused on the Ontario government's Northern Ontario Multi-modal Transportation Strategy.
The Coalition for Algoma Passenger Trains (CAPT) and Northern and Eastern Ontario Rail Network (NEORN) are encouraging those concerned about rail transportation in the North to attend the information session, which runs 4 to 8 p.m.
